HUD sues Allied Mortgage
On November 1st, the U.S. Department of Housing and Urban Development (HUD) alleged that Allied Home Mortgage Corporation was participating in fraudulent lending practices, suspending their ability to write home loans insured by Federal Housing Authority (FHA). HUD is suing Allied in federal court, alleging that one third of Allied loans made between 2001 and 2010 defaulted, leaving HUD with an $834 million bill for insurance claims.
Court documents show that HUD claims, “Allied has profited for years as one of the nation’s largest FHA lenders by engaging in reckless mortgage lending, flouting the requirements of the FHA mortgage insurance program and repeatedly lying about its compliance. In the past decade, Allied has originated loans out of hundreds of branches it never disclosed to HUD.”
HUD is seeking triple damages under the federal False Claims Act, claiming Allied’s CEO created a “culture of corruption” by using offshore compliance employees that were unaware of what mortgages were.
Now, Allied Mortgage is suing HUD
In an unprecedented move, Allied is fighting back, proclaims their innocence and points to their “exemplary” performance stats. “Allied Corp.’s total delinquency and claim ratio is 87 percent, or less than the national average,” Allied claims in their lawsuit against HUD.
According to a federal lawsuit Allied, who claimed in 2010 that they are the biggest closely held mortgage broker in America, has filed against HUD, roughly 70 percent of all of Allied’s business is FHA-backed loans, and HUD’s suspending them terminates their ability to do business. Additionally, according to Bloomberg, the suspension will cause Allied’s warehouse financing lines of credit to be terminated.
“This means that Allied Corp. will not only be unable to originate FHA-insured mortgage loans, but Allied will also be unable to originate any sort of mortgage loans — whether FHA- insured or not,” Allied’s lawyer said. “HUD has improperly used its regulatory power of suspension to get, essentially, a combined temporary restraining order and preliminary injunction against Allied Corp., without any judicial review or due process.”
Allied has requested that the judge suspend the HUD suspension until the lawsuit is resolved and has asked that their FHA origination and underwriting privileges be reinstated, saying the government has overstepped their bounds by essentially punishing them prior to any guilt being proven, a move they say will destroy their business.
Interestingly, this is what Allied’s website looks like today: